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Hurricane Energy confident of significant value creation from Lancaster

Published: 12:40 10 Jun 2015 BST

Hurricane,_drill_crew
‘First oil’ can be acheived with fewer wells and with lower capital costs

Hurricane Energy (LON:HUR) chairman John Hogan acknowledged investors frustrations at the current lack of news flow since the success of the Lancaster appraisal project in the North Sea.

But, in today’s AGM statement, the Hurricane boss says he’s confident that ongoing work will provide a foundation for significant value creation.

Hurricane made important technical strides during 2014 as it completed the Lancaster programme which flowed oil at rates up to 9,800 barrels per day (a rate capped by equipment) and, crucially, confirmed the reservoir can support a commercially attractive phased development.

It has since worked with Schlumberger on a state-of-the-art full field simulation model of the reservoir; an activity that the company says has marked a ‘step change’ in its understanding of the field.

Starting with an early production system Hurricane believes the project remains economically attractive even at crude oil prices below current levels.

Hurricane, which still retains 100% of the project, says it is now planning for a ‘higher productivity’ reservoir which would be developed to ‘first oil’ by fewer wells and with lower capital costs.

The company has presented the phased development plans to potential farm-in partners, as part of an ongoing process, and it says it has received significant levels of industry interest.

"It is very encouraging that we have a development plan for Lancaster that is economically robust at oil prices below those currently prevailing and I therefore expect this will be an attractive project to industry partners,” Hogan said in the statement.

“During commercially sensitive farm-out discussions a lack of news-flow can understandably be frustrating for shareholders, but the company must act in their best interests by not compromising ongoing negotiations by making public statements before a definitive conclusion has been reached.

“We are confident that these discussions, coupled with the excellent technical progress we have made on Lancaster with our recent work, will provide the foundation for significant value creation for our shareholders.”

Options to fund the Lancaster development, which may or may not include a farm-out, are being considered from a position of strength, Hurricane said.

Whilst a farm-out process and technical work is ongoing, the company has decided to defer plans to commission a new competent persons report for the project until it has determined a full field development plan for the Lancaster reservoir,

As a result of this decision the company believes the CPR will, once complete, have greater value and relevance.

 

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